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On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant Was as Follows : the Firm Closes Its Books on 31st March Every Year. Partners Share Profits in the Ratio of Their Capitals. Prepare Gunvant'S Capital Account to Be Presented to His Executors - CBSE (Arts) Class 12 - Accountancy

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Question

On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant was as follows :

Liabilities

Amount

Rs

Assets

Amount

Rs

Sundry Creditors

General Reserve

Capital Reserve

    Anant    30,000

   Sampat   15,000

   Gunvant  15,000

9,000

9,600

 

 

 

60,000

Bank

Bills Receivables

Stock

Tools

Furniture

 

15,600

18,000

18,000

3,000

24,000

 

  78,600   78,600

Gunvant died on 30.9.2014. Under the terms of Partnership Deed, the executors of the deceased partner were entitled to:

(a) The amount standing to the credit of partner's capital account.
(b) Interest on capital @12% per annum.
(c) A share of goodwill on the basis of twice the average of past three years profits.
(d) A share of profit from the closing of last financial year to the date of death on the basis of last year's profit.

The profits of the last three years were as follows:

Year Profit
2011 - 2012 18.000
2012 - 2013 21,000
2013 - 2014 24,000

The firm closes its books on 31st March every year. Partners share profits in the ratio of their capitals.
Prepare Gunvant's Capital Account to be presented to his executors

Solution

Gunvant’s Capital Account
Dr.   Cr.
Particulars  Rs Particulars Rs

To Executor A/c

 

 

 

 

 

31,800

 

 

 

 

 

By Balance c/d

By Interest on Capital A/c

By Profit and Loss Suspense A/c

By Anant’s Capital A/c

By Sampat’s Capital A/c

By General Reserve A/c

15,000

900

3,000

7,000

3,500

2,400

  31,800   31,800

Working Notes:

WN 1 Calculation of Interest on Gunvant’s Capital

Interest on Capital = `15000 xx 12/100 xx 6/12 = 900`

WN 2 Calculation of Gunvant’s share of profits

Profit of last financial year (2013-14) = 24,000

Gunvant's share in profits = `24000 xx 1/4 xx 6/12 = 3000`

WN 3 Adjustment of Goodwill

Average Profit = `(18,000+21,000+24,000)/3 = 21000`

Goodwill of the firm = `21000 xx 2 = 42000`

Gunvant's Share of Goodwill = `42000 xx  1/4 = 10500`

Anant will pay = `10500 xx 2/5 = 7000`

Sampat will pay = `10500 xx 1/3 = 3500`

WN 4 Calculation of Gunvant’s Share in Reserve Fund

Gunvant's Share in General Reserve = `9600 xx 1/4 = 2400`

Note: Since, here no information is given regarding the share acquired by Anant and Sampat, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 2:1

  Is there an error in this question or solution?

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Solution On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant Was as Follows : the Firm Closes Its Books on 31st March Every Year. Partners Share Profits in the Ratio of Their Capitals. Prepare Gunvant'S Capital Account to Be Presented to His Executors Concept: Concept of Goodwill.
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